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Minnesota minimum wage hike cheered by workers; employers critical

With DFLers in control of state government, a raise for Minnesota's lowest-paid workers seems more likely than it has been in years. Now, a bill that could give Minnesota the highest state-mandated minimum wage in the country has cleared its final committee in the Minnesota House.

Some economists say the effect of a minimum wage hike on the overall economy is negligible, but it is likely to make a large difference in the lives of minimum wage workers and also many of the people who pay them.

Judith Palmas is one of an estimated 93,000 Minnesotans who earn minimum wage. She works at a hotel in Bloomington delivering room service and is paid the federal minimum of $7.25 an hour.

"My paychecks are usually like $600. The last one was $661," Palmas said.

That's pay for two weeks of full-time work. Palmas gets occasional tips but money is tight, she said, especially with a two-year-old daughter to support.

"The cost of living has gone up and up but our wages have stayed pretty much the same," Palmas said. "Everything is being raised, and if our wages are staying the same, it's really affecting us."

That's why Palmas strongly supports legislation that would raise Minnesota's minimum wage for large employers to $9.95 an hour by August 2015 and index it to inflation thereafter. For Palmas, that would mean paychecks closer to $800.

The DFL-sponsored bill would give Minnesota the highest state-mandated minimum wage in the nation, just above Washington. The city of San Francisco has the highest of all at $10.55.

However the bill's opponents -- mostly Republicans - said it will be bad for business. And it's not hard to find business owners who agree.

Peter Schoell owns several movie theaters in central Minnesota, including the three-screen Hollywood Theater in downtown Litchfield. Two of the screens show film. For the third, the largest screen, Schoell installed a digital projector at a cost of about $55,000 -- a major investment for a small business.

Even with state-of-the-art equipment, a movie ticket here costs $6.50. A large popcorn costs $4. With the cost of living in rural Minnesota lower than in the Twin Cities, Schoell said he wants to provide families here with an affordable night out. His employees are mostly teenagers who work an evening or two a week. He pays them minimum wage. But even that's too much, he said.

"If I were to pay them what they're worth, it would probably be about $5 an hour, but I'm forced to pay $7.25," he said.

If the minimum wage goes up again, Schoell said he will have to raise ticket prices. He fears losing business as a result.

"What are we supposed to do? Do they think that business owners are making all this money?" Schoell said. "Because that's where that extra minimum wage is going to come out of. It's going to come out of my bottom line."

“I think it'll force us to run our company more efficiently and different than we do now. I think we'll have to afford it. I think it's the right thing to do as a company and in general.”

Erin Wambach, owner of In the Pink

Other entrepreneurs welcome the minimum wage increase. Erin Wambach owns In the Pink, a Twin Cities house-cleaning company with 15 full-time employees. Wambach said she already pays her workers above the bare minimum and would be glad to pay them even more.

"I think it'll force us to run our company more efficiently and different than we do now. I think we'll have to afford it. I think it's the right thing to do as a company and in general," Wambach said. "A lot of the people that work for me and make that kind of money are really struggling."

Other supporters of a higher minimum wage say it will boost the economy as workers spend more. Opponents say it will hurt the economy because employers will have to cut staff or reduce hiring.

Both arguments are reasonable, St. John's University economics professor Louis Johnston said, but there is little evidence to show any major economic effect either way.

"Yes, it does put more money in people's pockets, but the amount is not big enough to push the U.S. economy one way or another," Johnston said. "And the same with the hiring: it's more of an individual effect or a small group effect.

That's why, Johnston said, as the debate continues in the legislature we will likely hear more from people who are struggling to live on the current minimum wage as well as some of the business owners who are struggling to pay it.